On the day that Britain formally began the process of leaving the European Union, Lloyd’s announced it would open an office in Brussels so it could provide uninterrupted service to continental European customers. This was clearly not an overnight decision. Since the announcement of the referendum, the UK insurance industry has been contemplating how an ‘out’ vote would affect it.
Lloyd’s especially and the UK industry were generally disappointed by the result of the referendum on 23 June 2016. Although global markets, especially North America, traditionally have been more important sources of business for London than continental Europe, the insurers have wanted to build more links with the rest of Europe, taking advantage of the single passport. They had already gone to the expense and effort of implementing Solvency II. FERMA itself gained in a small way from the market’s development of its links with the rest of Europe through a joint training programme for newer risk managers with Lloyd’s.
In today’s competitive global insurance market, no insurer wants to give up a solid block of business, so the move by Lloyd’s was not a surprise. Speaking for FERMA as a Brussels-based organisation, we were delighted by the choice of location. A potential increase in costs must, however, be a concern for them. Like Switzerland and Bermuda, the UK will need a regulatory regime that is either Solvency II or one which the EU recognises as equivalent to maintain joint recognition. In any case, the trend is toward global solvency standards. It is increasingly difficult for insurers to compete through regulatory arbitrage.
For continental businesses, London is not a bulk market, but a valuable source of capacity in terms of expertise, innovation and higher limits that we would not want to lose. For our companies, there is going to be some uncertainty in terms of compliance, especially on global programmes, during the two years before the UK finally leaves the EU. However, London has been an international insurance market for hundreds of years, and we are confident that the insurers are focussing on the best ways to maintain service to their customers.